Retirement plan could prove a winner

WASHINGTON -- Democrats did a skillful job of demagoguing President Bush's plan to let workers invest some of their Social Security taxes, but now another idea is waiting in the wings that could be far more popular.

The core of Bush's retirement-investment plan was to provide a way for low- to middle-income Americans to build wealth over their working years by taking advantage of higher-yield, diversified, blue-chip stock and bond funds that wealthier people enjoy.

Democratic leaders and the powerful AARP lobby persuaded voters -- especially older Americans -- this was a risky idea that would destroy Social Security.

But the members of Congress who rejected Bush's plan have their own gold-plated government pension plan that allows them to invest in stocks and bonds, which most of them do. And no sooner had the AARP killed Bush's proposal with a fear-mongering TV ad campaign, it offered stock and bond investment funds to its members. So much for a risky scheme.

Someone will resurrect Bush's proposal in the years to come to save the Social Security system from bankruptcy, but in the meantime, there is another retirement-savings plan percolating here that may prove to be a winning issue in the 2008 election.

This idea, promoted by the conservative Heritage Foundation and the liberal Brookings Institution, is aimed at millions of lower-income workers who do not have access to 401(k) retirement plans because their small-business employers do not offer them or any other types of employer-sponsored plans.

Their strategy is "to make saving more automatic -- and hence easier, more convenient and more likely to occur," the think tanks said in a joint paper outlining the plan. It is based on the same strategy that has led to the success of 401(k)s.

But of the 153 million working Americans, 71 million "worked for employers that did not sponsor a retirement plan of any kind, and another 17 million did not participate in their employer's plan."

Enter Mark Iwry, a senior fellow at Brookings, and David John, senior fellow in retirement issues at Heritage, with what they call the "automatic IRA." It would enable workers in small businesses who have no employer-sponsored plan to put aside regular savings in an IRA through the power of the automatic payroll-deposit system used by 401(k) plans.

"In short, the ultimate goal is to give workers access to retirement savings in every job they hold," Iwry and John wrote in their paper.